Due to the rapid rise in interest rates, there may be more victims in the financial system. This says the internal economist of BNR, Han de Jong. According to De Jong, central banks have been generating liquidity for years and encouraging borrowing due to low interest rates. “And then in 2022 those central banks will raise interest rates at a record rate.”
According to De Jong, central banks have kept interest rates close to zero for years. They have therefore generated an enormous amount of liquidity during the corona pandemic. “This combination encourages debt. Then we get inflation and then in 2022 those central banks are going to raise interest rates at a record pace.’
‘Dutch banks are very solid. They are solvent and very liquid’
Squeak and creak
It stands to reason that the system will creak and creak and that parties will fall if they have not spread their risks correctly. Now six central banks will ease the dollar liquidity position with banks. A sensible precaution, thinks De Jong, who underlines how much the dollar is a key currency in international monetary transactions. “In 2020, we saw problems arise in other parts of the world due to a lack of dollar liquidity.” Now that liquidity is actually guaranteed.
No problem
De Jong doesn’t think Dutch savers need to worry about their deposits. ‘Dutch banks are, as far as I know, very sound. They are solvent and very liquid. A second point is that the authorities in America and now also in Switzerland have reacted very quickly and responded well. Actually better than in 2008. So you certainly don’t have to worry about that in the short term.’
It doesn’t matter that De Jong feels “a deep gnawing”. “And that’s obviously because of the rapid rise in interest rates, there will still be casualties in the financial system, not in the Netherlands I think, but maybe elsewhere.”
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
